A top reason enterprises move their infrastructure and applications to the cloud is to reduce capital expenditure. The pay-as-you-use model is attractive as it allows companies to deploy resources when needed and stop them when not in use. Simple, isn’t it? However, the reality is quite different. Companies end up losing millions of dollars every year due to mismanaged cloud resources. Here’s what you should know.
Challenges of managing cloud expenditure
Enterprise spending on public cloud has been growing quickly and significantly. According to recent surveys, companies plan to spend 24% more on public cloud in coming years as compared to past years. Ironically, while one of the main benefits of moving to cloud is cost savings, it can quickly spiral out of control and become a significant challenge for your organization. Here’s what this boils down to:
- One of the key challenges cited by enterprises is understanding the cost implications of licensed software running in the cloud. Optimizing existing cloud usage for cost savings will be a top priority for IT teams in coming years.
- Like any IT service, public cloud can involve unexpected charges. It can be noted that most of the cloud teams are not doing all they can do to optimize their cloud expenditure. Only a limited number of companies have implemented automated systems to manage the cloud expenditure.
- Cost unpredictability has become one of the main pain points for cloud management. A contributing factor to this is the difficulty organizations have in tracking and forecasting cloud usage. A report found that unpredictable budget costs was one of the biggest cloud management pain points for 37% of respondents, while 30% had difficulty with lack of transparency and visibility.
- The flexibility to scale up and down on demand has become a double-edged sword. On one hand, it is beneficial as companies can engage infrastructure only when required and save cost when not in use. On the other hand, if the demand is not properly estimated, it can result in over-estimation and underutilization of resources.
No wonder cloud cost management and cloud governance have emerged as top concerns for enterprise customers!
6 ways to manage cloud expenditure
Cloud cost management is not a fix-and-forget process. It is a meticulous and continuous activity that needs to be undertaken from the beginning. Here are a few ways you can immediately start saving money on your cloud infrastructure costs.
1. Identify wastage
The first step to reducing cloud expenditure is to uncover inefficient use of cloud resources. You will need to address key areas that account for the majority of wasted cloud spend and budget overruns. If you find resources which are under-utilized, quickly find ways to either use them or de-implement them.
2. Right-size your instances
Have a clear understanding about the resource utilization and performance requirements before you finalize the sizing for your instances. Oversized instances are one of the main culprits for overspending on cloud resources. Around 40% of instances are sized larger than necessary and could easily be scaled down without impacting application performance.
3. Set up clear budgeting and governance policies
Once your requirements are set, ensure that you have clear policies regarding budget and governance. Set budget caps aligned with your growth projections at organizational unit and account levels which will prevent internal IT teams from overspending. It is also advisable to have guidelines in place so that any usage goes through a proper approval process to avoid unnecessary spending.
4. Provide visibility
Teams should have a clear visibility into what they are spending. Identify which resources are being used and who owns it. Tagging resources with user ownership will allow the teams to track usage effectively and shut down unutilized cloud resources.
5. Clear unused storage
Evaluate what you are storing on the cloud. As Virtual Machines are shut down, the attached storage can sometimes be left running, which contributes to unnecessary spending. It is better to delete unused storage. Furthermore, shutting down instances during nights and weekends can also help save about 70% of runtime costs. Define which environments need 24×7 availability, and set schedules for the rest.
6. Select cloud region wisely
Review the regions in which your services are running. Cloud providers offer regions to help customers store resources closer to where they need to be. The cost of services per region can vary by as much as 60%. Ensure that the need of running services in a given region balances the costs involved.
Exceeding set budgets for cloud is a common yet avoidable problem for most organizations. If time and resources are roadblocks you face while managing cloud costs, look to using a cloud management platform. You could also partner with a cloud service provider who can optimize, control, and manage your cloud spending for you. Whatever path you choose, committing to a culture of cost management and optimization will be a game changer for your organization and your business.